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Does stock exchange consolidation improve market liquidity? A study of stock exchange acquisition in Russia

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  • Teplova, Tamara V.
  • Rodina, Victoria A.

Abstract

The last couple of decades have witnessed significant institutional and structural changes in financial sector within a worldwide trend toward consolidation. In the segment of organized trading stock exchanges merge and develop into large and diversified publicly traded companies. These processes are rather complicated in case of a transition economy like Russia. In December 2011 MICEX, the first largest and state-controlled stock exchange acquired RTS, the second largest and privately owned stock exchange primarily designed for foreign investors. We empirically investigate whether the acquisition resulted in improved liquidity of the Russian stock market which was one of the declared acquisition objectives. We use the Kolmogorov–Smirnov and the Wilcoxon tests to compare market-wide liquidity in several discrete periods pre and post acquisition. A deep and thorough insight into liquidity performance is ensured by assessing liquidity from limit order book data of tick frequency along three dimensions (tightness, immediacy, and elasticity).

Suggested Citation

  • Teplova, Tamara V. & Rodina, Victoria A., 2016. "Does stock exchange consolidation improve market liquidity? A study of stock exchange acquisition in Russia," Research in International Business and Finance, Elsevier, vol. 37(C), pages 375-390.
    • Handle: RePEc:eee:riibaf:v:37:y:2016:i:c:p:375-390
    DOI: 10.1016/j.ribaf.2016.01.016
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    More about this item

    Keywords

    Moscow Exchange; Exchange acquisition; Exchange consolidation; Market liquidity; Liquidity dimensions; Tick frequency;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • F3 - International Economics - - International Finance

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